The use of unaccredited emergency accommodation in NSW's state care system has been slammed in multiple reports including in August by a children's advocate.
Criticisms include costs of up to $2 million per child per year, many staff lacking therapeutic trauma-informed approaches and instances of children not being properly fed or clothed.
Describing it as a "long overdue" move, Families Minister Kate Washington said so-called alternative care arrangements will be prohibited by February.
That time will allow for 39 children still in the system to be relocated into suitable settings, such as a safe return to their parents or going to an intensive therapeutic care environment
A dedicated team inside government has already shifted another 100 children out of alternative care arrangements since November.
Ms Washington said the use of third-party emergency accommodation providers for vulnerable children skyrocketed under the previous government.
Government oversight was limited while providers were not required to meet the NSW Child Safe Standards for Permanent Care.
"Since I became minister, I've made it very clear that vulnerable children do not belong in hotels, motels or caravan parks with shift workers instead of foster carers," she said on Tuesday.
"We acted early, and we're already seeing meaningful results, with the number of children in unaccredited alternative care arrangements falling by 72 per cent in just eight months."
The Advocate for Children and Young People in August found children felt unsafe, unsupported and disconnected in the temporary arrangements, with health and schooling often affected.
One boy likened himself to "a doggy in the pound ... moving from cage to cage" while girls raised concern about their risk of abuse.
The boy's comments were picked up in the title of the advocate's interim report: "Moving Cage to Cage".
In a case highlighted by a court in 2022, two brothers watched their near-perfect school attendance plummet after a care agency receiving $2600 a day regularly dropped them off late and failed to properly feed and clothe them.
"There's been no evidence that has come to me that these arrangements are good for children and young people," NSW Advocate for Children and Young People Zoe Robinson said in May.
The "last resort" placements have cost about $500 million in the past six years.
Using hotels and motels for out-of-home-care placements has also been used in Victoria, where a children's advocate in 2019 found such instability harms children and young people.
It has also drawn criticism for its use in New Zealand, the United Kingdom and the United States, where young people sued the state of Oregon to curtail the practice.
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